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Internship Report on Financial Statement Analysis

and Performance Evaluation of Farr Ceramics


Limited.
Supervised by
Riyashad Ahmed
Assistant Professor
Department of Finance
BRAC University

Prepared By
Mahmud Hasan
Student ID:12264059
Department of Finance, MBA Program
BRAC University

BRAC University
Date of Submission: 17th August, 2015

LETTER OF TRANSMITTAL
17th August, 2015

Riyashad Ahmed
Assistant Professor
Department of Finance
BRAC University
Mohakhali-66, Dhaka-1212

Subject: Submission of internship report.

Dear Sir,
This is my pleasure to present my Internship Report entitled- Financial Statement Analysis and
Performance Evaluation of Farr Ceramics Limited

I have conducted my internship program in FARR, 52 New Eskaton Road, and effect from the 10
May 2015 to 10 August 2015 with your kind supervision. I have invested my every effort to
financial functions performed by Farr.

I believe that the knowledge and experience I gathered during the internship period, will be
helpful in my future professional life. I will be grateful to you if you kindly accept this report.
Thanking you for your time and kind supervision.

Sincerely Yours,

Mahmud Hasan
ID No: 12264059
Program: MBA (Major in Finance)
BRAC University

ACKNOWLEDGEMENT

A detailed research type report cannot be completed without the help of significant others. I
would like to thank a first; the Almighty Allah, who has given me the courage, patience,
knowledge and fitness to complete the report promptly and within right time. The heartfelt
support or cooperation that I have received while doing the internship and preparing the report is
unforgettable and very appreciable. I would like to thank my parents, teachers, officials and
friends; who has helped me directly and indirectly to finish the report as per the instruction of my
honorable supervisor. I would like to mention the name of some person, whose contribution in
completing my internship and report are highly obvious from all aspects. Firstly, I would like to
express my heartfelt gratitude towards my honorable academic supervisor; Riyashad Ahmed,
Assistant Professor, who has directed, monitored and helped me continuously whenever I needed
in doing internship and report. Secondly, the support and compliment that I have received from
my honorable Managing Director; Mr. Irfan Uddin, has increased my motivation, confidence
level and has eased the path of collecting data because he permitted me for doing analysis and
working anywhere within the office I needed most. Thirdly, The help from General Manager;
Mr. Modhu sudan saha is worthy to mention because he provide me some resources that were
apparently impossible to get and took good care of me while doing internship. Lastly, I would
like to admire the outstanding support and time; provides by Mr. Rezaul Karim, General
Manager of Finance, regarding my quarries about financial performance analysis and course
related data and customer satisfaction. He has contributed deeply at each step of this analysis
based internship report.

Table of Content

SL.

Particulars

Page No.

Executive Summary

Chapter-1
1.1
1.2
1.3
1.4
1.5
1.6

Chapter-2
2.1
2.2
2.3

Chapter-3
3.1
3.2
3.3
3.4
3.5
3.6
3.7

Chapter-4
4.1

4.2

An Overview of FCL

01-08

Background and History of Farr


Organizational Structure of Farr Ceramics Ltd.
Products of Farr Ceramics
Position of Farr Ceramics in Bangladesh Market
Operating Performance of FCL last 5 years
Financial Performance of FCL last 5 years

02
03
04-06
06
07
08

Job Description in FCL

09-13

Front Desk : Experience, Responsibilities,


observation and Recommendation
Accounts and Finance Department : Experience,
Responsibilities, observation and Recommendation
Marketing or Sales Department : Experience,
Responsibilities, observation and Recommendation

11-12

Introduction

14-18

Summery
Description of the Project
Significance of the Report
Scope of the Report
Objectives of the Report
Methodology
Limitations

15
15
16
16
17
17-18
18

Financial Statement (Ratio) Analysis

19-40

Financial Statement Analysis of company


Methods of Analysis
Liquidity Ratio
Current Ratio
Working Capital
Cash Conversion Cycle
Asset Management/Efficiency Ratio
Inventory Turnover

20-21
21-22
23-26

12-13
13

27-31

4.3

4.4

Chapter-5

Total Asset Turnover Ratio


Days sales Outstanding
Average Payment period
Debt Management Period
Debt Ratio
Times Interest Earned Ratio
Profitability Ratio
Net Profit Margin Ratio
Gross Profit Margin Ratio
Operating Profit Margin Ratio
Return On Equity
Return On Asset

Performance Evaluation of FCL

32-34

35-40

41-47

5.1
5.2

Days Sales Outstanding to Average Payment Period


Net Asset Value per Share (NAV) of 2014of FCL
with Monnu Ceramics, Shinepukur and Fu-Wang
Ceramics Limited.

43
44

5.3

Revenue of 2014 of FCL compare with Monnu


Ceramics, Shinepukur and Fu-Wang Ceramics
Limited

45

5.4

Net Income of 2014 of FCL compare with Monnu


Ceramics, Shinepukur and Fu-Wang Ceramics
Limited

46

EPS of 2014 of FCL compare with Monnu Ceramics,


Shinepukur and Fu-Wang Ceramics Limited

47

5.5

Chapter- 6
6.1
6.2
6.3

Findings, Conclusion and


Recommendations
Findings
Conclusion
Recommendation
Bibliography
Appendix

48-51
49
50
51

EXECUTIVE SUMMARY

The main focus of this report is on the Financial Statement Analysis and Performance Evaluation
of Farr Ceramics Limited. In order to focus on the financial performance and evaluation of Farr
Ceramics Limited, the study focuses on the financial statement and ratio analysis, liquidity ratio,
Efficiency ratio, Debt Management and Profitability and also analyze the market position by
comparing FCLs Revenue, EPS, NAV, Net Income with other ceramic companies. The study
has been conducted mainly based on secondary data. Moreover, on the study describe the
internship experience and objectives of the study. Some information has also been collected from
the discussion with the officers. Trend analyses are mainly conducted to analyze the trend of
liquidities, profitability, debt management and Efficiency of Farr Ceramics Limited. Recovery
performance of FCL within the ceramic industry is also analyzed in the report. FCLs results of
the study shows that, increasing trend of inventory turnover ratio, gross profit margin ratio
maintaining of debt to asset ratio. FCL is in second position covers 23% of market by their selling
excellent. Proper and effective monitoring system should be developed in order to ensure the
proper maintain liquidity and to minimize the debt of FCL.

Chapter: 01
An Overview of FCL

1.1 Background and History of Farr:


FARR Ceramics Limited (FCL) was established on 4th January 2005 as a private Limited
company with a view to producing world class porcelain Tableware. FCL is an Export Oriented
Company equipped with state-of-the-art technology. The entire plant was set up with machinery
from Germany, Italy and Japan. The factory is located about 40 KM north from Dhaka situated at
Noulapara, Bhabanipur, Gazipur.
FCL started its commercial production from March 2007 with an installed capacity of 32,000Pcs
per day. FCL has been equipped with Testing and Quality Control Laboratory, Decal&
Decoration plant, Carton-Packaging Plant, Modeling unit, Mechanical and Civil Engineering
section, Gas based power Generation unit etc. FCL is also an ISO 9001/2008Certified Company
maintaining absolute quality in production process.
At present FARR Ceramics Limited has its global network in more than 35 countries of the
world. FCL has strong market base in various countries all over the world such as Argentina,
Chile, Bhutan, Canada, Dubai, Egypt, England, Germany, Greece, Hong Kong, India, Italy,
Lebanon, Norway, Poland, Qatar, Singapore, Spain, Sweden, Switzerland, Syria, Turkey, UAE,
USA and so on. FCL is continuously searching for new market around the globe to expand its
brand footprint. Normally FCL exports 80% of its products to international market and 20% to
local market which includes various renowned corporate bodies, wholesalers, dealers etc.
Corporate office

TMC Building, 3rd Floor, 52 new Eskaton Road, Dhaka 1000


Bangladesh.

Factory

The factory is located about 40KM north from Dhaka situated at


Noulapara Bhabanipur, Gazipur.

Web Site

WWW.farr.com.bd

Total Revenue

US$ 2.5 Million - US$ 5 Million

Main Market

North America, Eastern Europe, South East Asia, Middle East, Western
Europe.

Product line

Round plate, dinner plate, meat plate, breakfast plate, cereal bowl, tea
saucer, casserole with lid, tea pot with lid, creamer, and platter and other
casting wares.

1.2 Organizational Structure of Farr Ceramics Limited:

Management Profile of Farr Ceramics Ltd.:


Managing Director

Mr. Irfan Uddin

Director, Marketing & Procurement

Abu Rawshan Mohammad Musa

Director, Finance

Irfan Uddin

General Manager, Production

Saidur Rahman Khan

Senior General Manager & Head of Marketing

Md. Mamunur Rashid

Assistant General Manager & Head of Finance

Md. Majbah Uddin

1.3 Products of Farr Ceramics:


FARR Euro Fine Porcelain Tableware
The brilliant whiteness and superb translucency have positioned FARR ultra white body practical
and stunning designs taking Porcelain to new height. Without reducing the mechanical strength,
FARR ultra white porcelain is refined to give the user a soft Bone China like feeling. Ultra white
porcelain is the result of super integration of the best quality of raw materials like as premium
quality New Zealand Kaolin and other additives and the result of innovation in receipt and
utilization of supreme human skill. Comparable in quality to the best Porcelain manufacturers,
FARR is one of the Globes.

A passion to inspire
FARR Fine Ivory Tableware
FARR FINE IVORY is a outcome of the creativity and innovation in Porcelain from its RND.
FARR Fine Ivory Tableware is designed to be an affordable luxury gives your tabletop a unique
and contemporary look. Exceptional in creamy and translucent body color, design and finish
exhibiting the inherent strength and purity feel like as New Bone China!

Creativity and innovation in Porcelain


4

FARR High Alumina Porcelain Hotel ware


Exuding elegance and finesse to enhance and compliment of your food presentation, each piece
also boasts hidden strength about 30% more than normal Porcelain because FARR High
Alumina Porcelain body containing about 30% purified Alumina originated from JAPAN. So it
can create truly unique and memorable dining experience- time after time.

Outward beauty, inner strength

Products line of Farr Ceramics Ltd.


The products line of FARR Ceramics is much diversified in terms of items and designs. The
products range from

dinner sets

tea sets

coffee sets

dessert sets

cake sets

Sweet sets to open stocks (like plate, oval dish, and bowl, cup with saucer, hollow-ware,
mugs, and flower vase and hotel wares).

FARR Ceramics also produces tableware of micro- oven, freezer and dishwasher proof.

FARR Ceramics also have been able to develop its in-house brands namely PARR Euro Fine
Porcelain Tableware which has brilliant whiteness and superb translucency including PARR Fine
Ivory and PARR High Alumina Porcelain tableware.
5

Quality of Products:

FARR products have zero water absorption, thermal shock resistance up to 200
degree centigrade, crushing strength of 900kg/sqcm, zero iron presence in the body,
etc.

All FARR products comply with the requirements of US FDA Standards and
Proposition 65 (California State).

Decorations are certified for Lead & Cadmium free.

At a glance, the products of FARR Ceramics are eye- catching and we are sure to
augment the food presentation in any significant occasion.

1.4 Position of Farr Ceramics in Bangladesh Market


Export of ceramics goods from Bangladesh, especially in the Middle Eastern countries has been
increasing steadily and it has given a boost to the countrys hopes for foreign exchange earnings
by exploring new markets for its diversified exportable.
Though Bangladeshs entry in ceramic export market is not that old but it had already earned a
good name for its quality products with a new product with elegant getup and design. The local
tableware industry has the capacity to feed the BDT 4000 millions domestic market but local
manufacturers are yet to fulfill the local demand.
The major Bangladesh ceramic tableware producers are:
SI No.

Name of the company

Position in
terms of
capacity

Position
in terms
of sales

Monno Ceramic Limited

3rd

2nd

Shinepukur Ceramic Limited

2nd

1st

Farr Ceramic Limited

1st

3rd

Paragon Ceramic Limited

4th

4th

1.5 At a Glance Operating Performance of FCL fir last 5 years:


Operating
Performance

2010

2011

2012

2013

2014

405719747

486281152

477192756

531859132

Expense

267842465

336863039

380,009,148

412992051

520999887

Profit before

169928561

105268820

65068835

12179969

51292359

10,802,567

14765439

94,466,252

50,303,396

9586606

Total Revenue
893863503

Total

Taxes
Provision for

Taxation
Net profit

69928561

41072321

After taxation
Earnings per

3.88

5.25

1.01

0.19

Share(EPS)

Table 1 FCL operating performance

0.82

1.6 At a Glance Financial Performance of FCL fir last 5 years:

Financial
Position

2010

2011

2012

Total NonCurrent
Assets

1,077,051,375

2,832,051,511 3,498,237,382

4,348,085,148 4479250640

Total
Current

342,497,392

327,226,813

508,954,659

1,419,548,767

3,159,278,323 3,993,265,824

4,857,039,807 5080876176

Total
219,525,506
Shareholders
Equity

1,339,209,464 1,604,512,875

2,135,042,326 2176114647

Total NonCurrent
Liabilities

953,276,876

1,430,380,381 1,751,498,516

2,036,750,964 1985861859

Total Current

246,746,385

389,688,478

685,246,517

495,028,442

2013

2014

601625536

Assets
Total
Assets

637,254,434

918899670

Liabilities
Total Equity
and Liabilities
Net Assets
Value Per Share
(NAV)

1,419,548,767 3,159,278,323 3,993,265,824 4,857,039,807 5080876176

137.20

74.40

32.09

Table 2 financial position of FCL

42.70

43.52

Chapter: 02
Job Description in
FCL

An overview of Internship
My internship experience at Farr Ceramics Limited started in the head office, located at New
Eskaton Road which is old, sophisticated and quit office. The office is a four storied building in
which around 24 officers of different designation works from 10 am of morning to 6 pm of the
night. The most attracting of the office is the state of the art design and space of the office
premise.
I started my internship from 10th of May, 2015 and ended on 10th of August, 2012. The
internship was approaches by the Managing director of FCL. Who send me to HRD, Farr
Ceramics Limited at New Eskaton to submit my CV. I was prepared for an interview which
happened after 2 hours of waiting. I meet with the authoritative person of the HRD who is
honorable of the HRD and MD of FCL. Then they took my short interview and told to wait the
final call. After 4 days, the call finally came; I was advised to receive the appointment letter.
After joining the office at the morning, the head office received my appointment letter warm
heartedly and introduced other with a new intern from BRAC University. At first, I have been
posted to front desk, the first customer get information about product and price services where I
passed second highest work time among all departments. I learned many thinks about customer
relationship maintain, phone call reception, customer dealing and there. Then I moved to
account, marketing and HRM department of the office and learned so many thinks which I never
imagined to learn. By this time, I I was able able to build relation with officer at the second floor
in front desk. Besides, I also learned some important think about account department which is
located at second floor. Account related activities has no known bounds and have many
difficulties and limitless pressure. Though the interns had nothing mentionable to do in the
account department, but I enjoyed the accounts job most after front desk; it was the place where I
passed 1 month because I found it most important and interesting for my report purpose. The job
rotation of employees and interns is very effective for better understanding of office.
My internship with the officials and others interns goes deeper and deeper as time passes and I
can confidently say that I tried to become a professional, hard-working, honest, responsible,
ardent and amiable person at my workplace. Finally, I got verbal compliments from my
Managerial Director, Accounts manager and officers who actually make me feel that I am
10

successful as an intern in their eyes. My confidence level has gone higher after finishing
successfully. The only problem I faced was the workless times at different departments and
doing nothing. However, I enjoyed my first time official attachment very much, indeed. My job
responsibilities, experience and recommendation at different department are explained in
following part.

2.1 Front Desk (Information center and Customer services)


Experience: Front desk of the office was one of the most mentionable work areas for me where I
have learned many things about office and customer relation. I got 60% of my internship
learning from there because I had to desk with different types of customers with varied
requirement to us. I generally; assisted my supervisor and other officers at front desk to execute
the tasks swiftly and successfully. Sometimes, I solely had to take the charge of the desk for a
while when other officers were not available. I observed firstly, the place or selves which are
frequently used by officers like the files-folders, different types of papers, magazines, stationary
box and so on. Therefore when they want anything from me, I can easily find those stuffs for
them. It also helped me to do my task when I was alone.
Job Responsibility: My job responsibility at the front desk was vast and diverse as an intern.
Apart from some specific tasks, I had to perform certain tasks during the office hour.
Dealing with clients as per the demand of client and officials
Responding to the queries in detail about different types of products and price.
Preparing list of customer name and accounts
Inspecting the magazine boxes and making forms and decorated magazines as per need
Filling up the important and unfilled item on a form
Filling the used, closed and pending forms
Finding files
Processing and enlisting papers
Receiving phone calls

11

Observation and Recommendation: From my observation, front desk has a high potential to
communicate with different level of customers. The officials of front desk have more client
related responsibility than other section. The job is a mixer of good and bad experiences but all
experiences can be counted. The desk demands fast, organized and perfect execution of works.
The authority should permit an intern to learn and use official accounting software to increase
their knowledge and experience levels. The most energetic, handsome and smart official should
always be placed at the fort desk.

2.2 Accounts and Finance Department


I spend one month in accounts and finance department during my internship under Mr. Rezaul
Karim.
Experience: The experience of the accounts is worthy to mention as accounts section maintains
the balance sheet of the branch. The tasks of the section were sensitive; one mistake in
accounting process or record can create many difficulties in office. I also learn how to finance
for their production. I found very helpful and resourceful to learn from the affairs sheet of the
office because the accounts statement of the company quit different from statement that we
normally practiced n our classes. I have learned about the income-expenditure, asset-liability
terms of the company.
Job Responsibility: Job responsibilities at accounts and finance were short because of the work
sensitivity.

Checking debit and credit entry in number and amount from audit trial to general account
sheet

Calculating daily entries and position of demand sales, account receivable and payable

I was entry data and calculated the total wages and salaries earned by every employee
every pay period

All cash received from sales and from all other sources has to be carefully identified and
recorded

12

Sometimes I responsible for keeping track of all purchase orders that have been placed
for inventory (products to be sold by the business) and all other assets and services that
the business buys.

Observation and Recommendation: The task of accounts is very sensitive and warrants highest
attention in recording and security activities. The learning from accounts helped me to
forwarding as I know the term of balance sheet which is an accumulation of entire function of
office. The work of financial statement was easy because my understanding of accounts was
good.

2.3 Marketing or Sales Department


I spend only 10days in marketing department and watched their lots of tasks. Though this
departmental work not related to my study I could not get much time to spend.
Experience: Marketing is the most important parts of any business activity. I knew from the
experience It is creates customers and generates income, guides the future course of a business
and defines whether it will be a success or a failure. Without marketing, a business is like sitting
in the dark. I got experience; how they update their website, create their customer chain and
strategy to build customer satisfaction.
Job Responsibility:

Listened customer needs and demand

Track trends and monitor competition

Coordinated efforts with marketing partners of the company

Communicate with the rest of the company

Help to improve sales process and customer

Observation and Recommendation: Marketing departments tasks are also much secure for
their product designing and spreading. The learning from marketing strategy helped me to
forward increasing sales demand cause. The work of customer satisfaction was easy because it
was easier term based on advertising, segmentation and promotion.
13

Chapter: 03
Introduction

14

3.1 Summery:
Financial performance analysis can identify the financial strengths and weaknesses of the firm by
properly establishing the relationship between the items of balance sheet and profit and loss. It
helps a firm to indentify short term and long term growth forecasting. This analysis can be
undertaken by management of the firm or by parties outside the namely, owner, creditors,
investors. Financial statement analysis involves the re-organization of the entire financial data
contained the financial statements. It is the establishment of significant relationships between the
individual components of balance sheet and profit loss account. This is done through the
application tools of financial analysis like ratio analysis, trend analysis, common size balance
sheet and comparative balance sheet. This is used for determining the investment value of the
business, credit rating and for testing efficiency of operation. Every company need to analyze
financial statement to know the performance of a company and company take their decision and
recovery procedure if need.

3.2 Description of the Project:


This internship report is prepared as a mandatory course fulfillment of the requirement of MBA
program. It is my great pleasure to permit to complete internship report on Financial
Statement Analysis and Performance Evaluation of Farr Ceramics Limited. I am student
of MBA program. I sincerely believe that my practical knowledge and experiences gathered from
this study will be very helpful in my future life for doing any types of research work.

The industrial venture is a private limited company which has been incorporated with the register
of the join stock companies, Gov. of the Peoples of Bangladesh under the mane and style Farr
Ceramics Limited. As per the companies Act-1994 the company is going to be a Public Limited
company very soon and related works in this regard is under process.

This internship report is submitted after completed of three months internship program in Farr
Ceramics Limited to the internship supervisor. This program direct authorized by me to submit
the report on Financial Statement Analysis and Performance Evaluation of Farr Ceramics
Limited. This internship program was started from 10th May, 2015.
15

3.3 Significance of the Report


This internship report is an important partial requirement of MBA program because knowledge
and learning become perfect when it is associated with theory and practice. Students can
establish contacts and networking by this internship program. Contacts may help to get a job in
future. That is, student can train and prepare themselves for the job market. Developing country
in the world like Bangladesh has an overwhelming number of unemployed educated graduates.
Therefore; it is obvious that the significance of internship is clearly justified as the crucial
requirement of MBA Post graduation. The main theme of internship of internship is together
practical experience and knowledge about the corporate activities of different sector of the
business. It also helps a lot to compare the theoretical knowledge with the practical field.
Furthermore, the program has helped me a lot to understand the organization atmosphere and
behavior.

3.4 Scope of the Report:


Farr Ceramics Limited is big private company. Hence, their economic activities and productions
are huge and versatile. Three month is not enough time to learn the vast financial activities and
production procedure. I tried to note my daily experience and finally make a combination of
them to prepare my project. This study is focused on the following areas of Farr Ceramics
Limited.

An overview of Farr Ceramics Limited.

Financial Statement analysis of five past years of Farr Ceramics Ltd.

Performance Evaluation of Farr Ceramics limited.

16

3.5 Objectives of the Project:


The objective of the project is to develop the concept about the various aspects of the
organizational structure, financial position, success and marketing process of the ceramic
industry. This study will help me to analyze the carious concept of financial statement analysis,
decision making in stable and unstable situation, how to increase the financial position,
organizational network and so on which will enrich my experience for my future career. More
specifically the objective of the study To practice knowledge and experience gathered from this study , which will
be very much helpful in my future life for doing any types of research work
To know the corporate activities of different sector of business sector.
To identify the total activities of ceramic industry
To get the exposure in business field
To indentufy the financial position of FCL
To find out the problem of FCL
To recommend the suggestion to solve the problem

3.6 Methodology:
3.6.1 Research Design:
The study on Financial Statement Analysis and Performance Evaluation of Farr Ceramics
Limited, is descriptive in nature which is mainly based on secondary data. The study focuses on
fainacial statement analysis using of ratio and measurement of performance of Farr Ceramics
LTD.
3.6.2 Data used in the study:
The study is mainly based on secondary data.

The audit report of Farr Ceramics Limited

Website of Farr Ceramics Limited

Magazines of Farr Ceramics Limited

Files and folder of Farr Ceramics Limited

Written documents of Farr Ceramics LTD


17

Statistical data of farr Ceramics LTD and

Different text book are the major data sources in this report.

Though the use of primary data are very limited in this report, some informantion has been
collected from the opinions of officials of FCL. The secondary data are collected for the
period of five years from 2010 to 2014.

3.6.3 Data Analyzing and Reporting:


Trend analysis and performance evaluations are made to analyze of Financial performance of
Farr Ceramics Limited. Trend of Liquidy Ratio, Efficiency Ratio, Debt Management Period and
Profitability Ratio are analyzed in the study. Software like microsoft word, excel are used for
analyzing and reporting purpose of the report.

3.7 Limitations of Report:


Though I have given utmost effort to prepare this paper but there are some limitations of the
study. Such are as follows:
The main constrain of the study was insufficiency of information, which was required for
the study. There was various information the head office employee cant provide due to
confidential and other corporate obligations.
Time constrains, three months are not enough to collect all necessary material
Lack of opportunity to visit production house.
The functions and activities of FCL are too vast, so they change their strategy day by day.
As a result I cant collect update information & strategy.
As I am student it is not possible for me to collect all the necessary information.
Lake of Experience.

18

Chapter: 04
Financial Statement
(Ratio) Analysis

19

Financial Statement Analysis Company:


Financial statement analysis (or financial analysis) is the process of reviewing and analyzing a
company's financial statements to make better economic decisions. These statements include
the income statement, balance sheet, statement of cash flows, and statement. Financial statement
analysis is a method or process involving specific techniques for evaluating risks, performance,
financial health, and future prospects of an organization.
Financial statement analysis should focus primarily on isolating information useful for making a
particular decision. The information required can take many forms but usually involves
comparisons, such as comparing changes in the same item for the sane company over a number
of years, comparing key relations within the same year or comparing the operations of several
different companies in the same industry.
Farr Ceramics Limited maintains the International Accounting Standards (IAS) rules and
regulation. The rules using by this company areIAS

1:51(a)

Farr Ceramics Limited

IAS

1:10(c)

Notes to the Financial Statement

IAS

1:51(c)

Analyzing Year

IAS

1:138

Legal Status and Nature of Company

IAS

1:38(a)

Registered Office and Principal Place of Business

IAS

1:38(b)

Principal Activities and Nature of operation

IAS

1:112(a)

Basis of Preparation

IAS

1:117(a)

Basis of Management

IAS

16:30

Depreciation of Fixed Assets

IAS

2:36

Valuation of Inventories

IAS

12

Taxation

IAS

37

Provision

IAS

21:7

Foreign Currency Translations

20

IAS

1:36

Basis of Reporting

IAS

1:54(b)

Accounts Receivable

IAS

1:79

Earnings Per Share (EPS)

IAS

39

Investments

Methods of analysis
Common methods of Farr Ceramics Ltd. is financial statement analysis include fundamental
analysis, horizontal and vertical analysis and the use of financial ratios. Historical information
combined with a series of assumptions and adjustments to the financial information used to
project future performance. Formulas of ratio are given below-

4. 1. Liquidity Ratio:
Current Assets
4.1.1.Current Ratio =
Current Liabilities
4.1.2. Working Capital= Current Assets Current Liabilities
4.1.3. Cash conversion cycle = DSO + DIO DPO
Days sales outstanding = 365/receivables turnover ratio
Days inventory outstanding = 365/inventory turnover ratio
Days payables outstanding = 365/payables turnover ratio
Cash conversion cycle = DSO + DIO DPO

4. 2. Asset Management/Efficiency Ratio:


Cost of Goods Sold
4.2.1.Inventory Turnover =
Average Inventory
Days inventory outstanding = 365/inventory turnover ratio = 365/10 = 36.4 days

21

4.2.2.Total Asset Turnover Ratio =

Net Sales
Average Total Assets

4.2.3. Days sales outstanding = 365/receivables turnover ratio

Net Credit Sales

Receivables =
Turnover

Average Accounts Receivable

4.2.4. Average Payment Period= (Accounts Payable Number of Working Days)/Net Credit
Purchase

4. 3. Debt Management period:


4.3.1. Debt Ratio =

Total Liabilities
Total Assets

Earnings before Interest and


Tax

4.3.2.Tmies Interest
Earned Ratio
=

Interest Expense

4. 4. Profitability Ratio:
4.4.1 Net Profit Margin =

4.4.2. Gross Margin =

Net Income
Net Sales

Gross Profit
Revenue

Operating Income
Revenue
4.4.4. ROE = Net income after tax / Average shareholder's equity
4.4.3. Operating Margin =

4.4.5.ROA =

Annual Net Income


Average Total Assets
22

4. 1. Liquidity Ratio
4.1.1 Current Ratio:
Year

2010

2011

2012

2013

2014

Current Ratio

1.388

0.840

0.777

0.743

0.655

Table 4.1.1: Current Ratio

Graphical Presentation:

Figure 4.1.1: Current Ratio

Interpretation: There is a downward trend of Current ratio. It sharply declined from 2010 to
2014 and reached only at 0.655. This indicates, over the time period, Far Ceramics greatly lose
its capacity to pay their current obligations by using its current assets. All of the ratios of the
years are less the 2, which indicates they are in risky position in current ratio.

23

4.1.2. Working Capital:


Year

2010

2011

2012

2013

2014

Working
capital

95751007

(62462665)

(14222599)

(176291858)

(317274134)

Table 4.1.2: Working capital

Graphical Presentation:

Figure 4.1.2: Working Capital

Interpretation: In 2010, working capital was in worst position. However, Farr Ceramics
Limited working capitals from 2011 to2014 are minus figure. These minus figure show that
companys working capitals have not good performance means that, their current liabilities are
greater than their Current assets. It indicates, FCL has great problem to maintain liquidity.

24

4.1.3. Current Ratio:


Year

2010

2011

2012

2013

74

72

2014

Cash Conversion
Cycle

145

-7

46

Table 4.1.3: Cash Conversion Cycle

Graphical Presentation:

Figure 4.1.3: Cash Conversion Cycle

Interpretation: Cash conversion cycle is the time it takes a company to convert its resource
inputs into cash. It measures how effectively a company is managing its working capital. We can
see that, cash conversion cycle was highly efficient in 2011 They needed -7 days to convert their
assets into cash and worst situation in 2010 when needed 145days.

25

Overall Interpretation of Liquidity Ratio of Farr Ceramics Limited


Liquidity ratio expresses a company's ability to repay short-term creditors out of its total cash. It
is the result of dividing the total cash by short-term borrowings. It shows the number of times
short-term liabilities are covered by cash.
Ratios
Current Ratio
Working

Interpretation

Remarks

There is a downward trend of Current ratio

Negative

There is a downward trend of Working capital

Negative

capital
Cash
Conversion

There is a worst situation in cash conversion cycle Medium


except 2011.

Cycle
Liquidity

Overall position of liquidity is not good

Negative

Position

There is a downward trend of Current ratio, and Working capital. Again there is a worst situation
in cash conversion cycle except 2011. Hence, it can be seen that, overall position of liquidity is
not good. FCL need to take some immediate step to recovery liquidity position.

26

4.2. Asset Management/Efficiency Ratio


4.2.1. Inventory Turnover Ratio:
Year

2010

2011

3.3

3.9

2012

2013

2014

2.3

2.5

3.4

Inventory
Turnover Ratio

Table 4.2.1: Inventory Turnover Ratio

Graphical Presentation:

Figure 4.2.1: Inventory Turnover Ratio

Interpretation: Inventory Turnover Ratio measures how effectively inventory is managed by


FCL comparing cost of goods sold with average inventory for a period. Over the span of 5 years
Inventory turnover ratio was worst position in 2012 at 2.3 It implies on that time FCL had poor
sales and, therefore, excess inventory. However, in 2011 it was peak and reached 3.9, which
indicate strong sales or ineffective buying.

27

4.2.2 Total Asset Turnover Ratio:


Year

2010

Total Asset

57%

2011
31%

2012

2013

24%

22%

2014
35%

Turnover Ratio
Table 4.2.2: Total Asset Turnover Ratio

Graphical Presentation:

Figure4.2.2: Total Asset turnover Ratio

Interpretation: In 2010, total asset turnover ratio is 57%. After that, it declined and reached
only at 22% in 2013 which means, Farr Ceramics had lower ability to generate sales from its
assets during those time. This ratio also indicates, FCL is not efficient to use its assets to
generate sales. However, it took recovery and reached 35% in 2014.

28

4.2.3. Average Collection Period/Days Sales Outstanding:


Year

2010

2011

2012

41.8

28.2

26.3

2013

2014

Days Sales
Outstanding

28.5

20.5

Table 4.2.3: Days Sales Outstanding

Graphical Presentation:

Figure 4.2.3: Days Sales Outstanding

Interpretation: It shows how well a company can collect cash from its customers. The sooner
cash can be collected, the sooner this cash can be used for other operations. Both liquidity and
cash flows increase with a lower days sales outstanding measurement. FCL has a downward
trend of Days; sales outstanding. It declined from 41.8 days to 20.5days. This indicates they
increase their strange to collect cash from their customers over the time period.

29

4.2.4. Average payment Period:


Year

2010

2011

2012

252

255

221

2013

2014

Average
Payment Period

226

160

Table 4.2.4: Average Payment Period

Graphical Presentation:

Figure 4.2.4: Average Payment Period

Interpretation: Average payment period means the average period taken by the company in
making payments to its creditors. If this period will be low, it will be good for our liquidity
because more smartly, we will pay our creditors, more amount of credit purchase, we can get.
From 2010 to 2013 FCL was smartly maintain their liquidity by taking more days, 252 days and
226 days accordingly. However, in 2014 it takes 160 days for their credit purchase which cut
their risk. Overall average payment period is in good position because its liquidity is not
satisfactory.

30

Overall Interpretation of Efficiency Ratio of Farr Ceramics Limited


Efficiency ratios also called activity ratios measure how well companies utilize their assets to
generate income.
Ratios

Interpretation

Remarks

Total Inventory

Total Inventory Turnover Ratio is in good position Positive

Turn Ratio

and reached peak in 2012.

Total Asset
turnover Ratio

There is a downward trend of Total asset turnover Negative


ratio.

Days Sales

There was a downward trend of Days sales positive

Outstanding

outstanding.

Average Payment

Satisfactory for liquidity.

positive

Efficiency ratio of FCL is medium position

positive

Period
Efficiency Position

Total Inventory Turnover Ratio is in good position and in 2011; it was peak and reached 3.9,
which indicate strong sales or ineffective buying. On the other hand, FCL is not efficient to use
its assets to generate sales. However, it took recovery and reached 35% in 2014. Again, there
was a downward trend of Days sales outstanding. However, there is a great strength in Average
Payment period. Overall, Efficiency ratio of FCL is medium position if they can continue it, they
may improve the company.

31

4.3. Debt Management Ratio


4.3.1 Debt to Asset Ratio:
Year

2010

2011

85%

58%

2012

2013

2014

Debt to Asset
Ratio

60%

56%

57%

Table 4.3.1: Debt to Asset Ratio

Graphical Presentation:

Figure 4.3.1: Debt to Asset Ratio

Interpretation: This ratio measures the financial leverage of FCL. It fluctuated over the time
period and reached from 85% to 57%. Moreover, it is a downward trend. The company must
decrease their debt to asset ratio.

Moreover, it performed greatly in 2013 at only 56%. They

must lower their debt level.

32

4.3.2 Times Interest Earned (TIE) Ratio:


Year

2010

2011

2012

2013

2014

TIE

3.55

5.76

1.27

0.10

0.29

Table 4.3.2: Times Interest Earned Ratio

Graphical Presentation:

Figure 4.3.2: Times Interest Earned Ratio

Interpretation: Times interest earned (TIE) ratio shows how many times the annual interest
expenses are covered by the net operating income (income before interest and tax) of the
company. In 2010 and 2011 it is adequate to protect the creditors interest in the firm at 3.55
times and 5, 76 times respectively. After that, ratio is less than 1 in 2013 and 2014, means the
company is likely to have problems in paying interest on its borrowings.

33

Overall Interpretation of Debt Management Ratio of FCL


Debt Management Ratios attempt to measure the firm's use of Financial Leverage and ability to
avoid financial distress in the long run. These ratios are also known as Long-Term Solvency
Ratios.
Ratios
Debt to Asset
Ratio

Interpretation
There is a downward trend of Debt to Asset Ratio.

Remarks
Negative

They must lower their debt level more.

Times Interest

There is a problem in paying interest on its borrowing Negative

Earned Ratio

after 2012.

Debt
Management

Overall position of debt management is in medium Negative


position because of times interest earned ratio.

Position

There is a downward trend of debt to asset ratio; it indicates company has lower level of
liabilities compared with assets and considered low leveraged and low risk but need to decrease
more debt. On the other hand, times interest earned ratio is less than 1 in 2013 and 2014, means
the company is likely to have problems in paying interest on its borrowings. Hence, overall
position of debt management ratio is not good.

34

4.4. Profitability Ratio


4.4.1 Net Profit Margin Ratio:
Year

2010

2011

2012

2013

2014

Net Profit
Margin Ratio

17%

19%

11%

2%

5%

Table 4.4.1: Net Profit Margin Ratio

Graphical Presentation:

Figure 4.4.1: Net Profit Margin Ratio

Interpretation: Net Profit Margin Ration of FCL increased slowly from 2010 to 2011 and
reached its peak in 2011 at 19%. After that, it dramatically declined and reached only at 2%. It
means, in 2011 FCL is in high position in profitability by earned amount of net income with each
dollar of sales.Net profit margin is not in good position except 2011.

35

4.4.2 Gross Profit Margin Ratio:


Year

2010

2011

2012

2013

2014

Gross Profit
Margin Ratio

28%

34%

32%

32%

32%

Table 4.4.2: Gross Profit Margin Ratio

Graphical Presentation:

Figure 4.4.2: Gross Profit Margin Ratio

Interpretation: Gross margin ratio is a profitability ratio that compares the gross margin of a
business to the net sales. Gross Profit of FCL increased from 2010 to 2011 and reached its peak
at 34% and it remained constant at 32% from 2012 to 2014. Hence, it is in better position by
improvement.

36

4.4.3 Operating Profit Margin Ratio:


Year

2010

2011

2012

2013

2014

22%

26%

24%

2%

6%

Operating Profit
Margin Ratio

Table 4.4.3: Operating Profit Margin Ratio

Graphical Presentation:

Figure 4.4.3: Operating Profit Margin Ratio

Interpretation: Operating Profit Margin Ratio of FCL fluctuated over the time, it increased
2010 to 2011 and reached 26% which is higher value and favorable for company, indicates
which indicates that more proportion of revenue is converted to operating income then it fall by
2%. It dramatically declined in 2013 and reached only at 2%. It recovers and reached 6% in 2014
that the profitability is improving. Overall operating profit margin ratio is good position except
2013.

37

4.4.4 Return On Equity (ROE) Ratio:


Year

2010

2011

2012

2013

2014

ROE Ratio

32%

7%

3%

0%

2%

Table 4.4.4: Return on Equity (ROE) Ratio

Graphical Presentation:

Figure4.4.4: Return on Equity (ROE) Ratio

Interpretation: There is a downward trend of Return on Equity ratio. It dramatically falls


from 2010 to 2011 and reached 7% only and then slowly declined till 2013 and gone to 0% then
it recovered and reached 2%. It indicates ability of FCL to generate profits from its shareholders
investment getting worse on the time period, which is harmful for the company.

38

4.4.5. Return On Asset (ROE) Ratio:


Year

2010

2011

2012

2013

2014

ROA Ratio

10%

6%

3%

0%

2%

Table4.4.5: Return on Asset (ROA) Ratio

Graphical Presentation:

Figure.4.4.5: Return on Asset (ROA) Ratio

Interpretation: It emerge that, over the span of five years, return on asset of FCL
dramatically declined and gone to zero in 2013. Furthermore, it increased by only 2% in 2014. It
indicates, net income produced by total assets is getting worse year by year. Hence, FCL is not
efficient company to manage its assets to generate profits.

39

Overall Interpretation of Profitability Ratio of FCL


Profitability is simply the capacity to make a profit, and a profit is what is left over from income
earned after you have deducted all costs and expenses related to earning the income.
Ratios
Net Profit Margin

Interpretation

Remarks

Net profit margin is not in good position except 2011

Positive

There is a increasing trend in gross profit margin ratio


it remain constant from 2012 to 2014

Positive

Ratio
Gross Profit
Margin Ratio
Operating profit
Marin Ratio
Return on Equity

Overall operating profit margin ratio is good except Positive


2013.
There is a downward trend of Return on Equity ratio

Negative

There is a downward trend of Return on Asset Ratio

Negative

Overall position is good except ROA and ROE

Positive

ratio
Return on Asset
Ratio
Profitability
Position

FCL is in high position in profitability by earned amount of net income with each dollar of sales
in 2011 but it is worst in other years position except 2011. On the other hand, Gross Profit
Margin Ratio is in better position by improvement. Operating Profit Margin Ratio of FCL
fluctuated over the time and overall operating profit margin ratio is good position except 2013.
Moreover, FCL generates profits from its shareholders investment getting worse on the time
period. Hence, in profitability, FCL is good enough and they need to concentrate more about
their Equity, Assets and sales.

40

Chapter: 05
Performance
Evaluation of FCL

41

5. Performance Evaluation of Farr Ceramics Limited


The level of performance of a business over a specified period of time, expressed in terms of
overall profits and losses during that time. Evaluating the financial performance of a business
allows decision makers to judge the results of business strategies and activities in objective
monetary terms.
Performance evaluation of Farr Ceramics Limited measures by the comparison of :

Days Sales Outstanding to Average Payment Period

Comparing NAV of 2014of FCL with Monnu Ceramics, Shinepukur and Fu-Wang
Ceramics Limited

Comparing Revenue of FCL of 2014 with Monnu Ceramics, Shinepukur and Fu-Wang
Ceramics Limited

Comparing net income of FCL of 2014 with Monnu Ceramics, Shinepukur and Fu-Wang
Ceramics Limited

Comparing EPS of 2014of

FCL with Monnu Ceramics, Shinepukur and Fu-Wang

Ceramics Limited

42

5.1 Days Sales Outstanding to Average Payment Period


Year

2010

2011

2012

2013

2014

41.8

28.2

26.3

28.5

20.5

252

255

221

226

160

Days Sales
Outstanding
Average
Payment Period

Table5.1: Days Sales outstanding to Average Payment Period


Graphical Presentation:

Figure5.1: Days Sales outstanding to Average Payment Period


Interpretation: Days sales outstanding declined over the period that indicates they increase their
strange to collect cash from their customers and it increase liquidity and cash flows with a lower
days. On the other hand, Average Payment period fluctuated and it declined when the sales
outstanding declined. It indicates FCL is highly efficient to manage their liquidity. When they
collected their cash in delay they pay to their creditors in delay, which ensure balance liquidity
and keep company risk free.

43

5.2 Net Asset Value per Share (NAV) of 2014of FCL with Monnu Ceramics,
Shinepukur and Fu-Wang Ceramics Limited
Companies name

Value

Farr Ceramics Limited

43.52

Monnu Ceramics Limited

95.19

Shinepukur Ceramics LTD

29.02

Fu-Wang Ceramics LTD

13.18

Table 5.2: Compare NAV of FCL with other companies


Graphical Presentation:

Figure5.2: Compare NAV of FCL with other companies


Interpretation: Net Asset Value per Share (NAVPS) refers to the value of a single unit, or
share, or a fund. This number for a mutual fund indicates the price at which shares are bought
and sold. FCL is in the second position in NAV in market.

44

5.3 Revenue of 2014 of FCL compare with Monnu Ceramics, Shinepukur and
Fu-Wang Ceramics Limited
Companies name

Value

Farr Ceramics Limited

893863503

23%

Monnu Ceramics Limited

692427630

17%

Shinepukur Ceramics LTD

1677657674

42%

Fu-Wang Ceramics LTD

692791034

18%

Table 5.3: Compare Revenue of FCL with others company


Graphical Presentation:

Table 5.3: Compare Revenue of FCL with others company


Interpretation:

Revenue

is

shown

usually

as

the

top

item

in

an

income

(profit and loss) statement from which all charges, costs, and expenses are subtracted to arrive
at net income, also called sales or turnover. The position of revenue in FCL is second by 23%.
FCLs

quality

full

product

can

45

bit

the

market

greatly.

5.4 Net Income of 2014 of FCL compare with Monnu Ceramics, Shinepukur
and Fu-Wang Ceramics Limited
Companies name

Value

Farr Ceramics Limited

41072321

Monnu Ceramics Limited

2544389

Shinepukur Ceramics LTD

15425038

Fu-Wang Ceramics LTD

41088653

Table5.4: Compare Net Income of FCL with others company


Graphical Presentation:

Table 5.4: Compare Net Income of FCL with others company


Interpretation:The company's total earnings, reflecting revenues adjusted for costs of doing bus
iness, depreciation, interest, taxes and otherexpenses. It measures the profitability of a company.
It can be seen that, Net profit of FCL is excellent position in the ceramics market. In 2014 its net
profit exit Shinepukur and Fu-Wang ceramics and bit to the Monnu ceramics Ltd. FCL earned
41072321 which are almost similar to Monnu Ceramics Ltd.

46

5.5 EPS of 2014 of FCL compare with Monnu Ceramics, Shinepukur and FuWang Ceramics Limited
Companies name

Value

Farr Ceramics Limited

0.82

Monnu Ceramics Limited

0.11

Shinepukur Ceramics LTD

0.02

Fu-Wang Ceramics LTD

0.49

Table 5.5: Compare EPS of FCL with others company


Graphical Presentation:

Table 5.5: Compare EPS of FCL with others company


Interpretation: Earnings per share are generally considered to be the single most important
variable in determining a share's price. It is also a major component used to calculate the priceto-earnings valuation ratio. FCL has higher earnings per share which always better than a lower
ratio because this means the company is more profitable and the company has more profits to
distribute to its shareholders comparing to other company.

47

Chapter: 06
Findings, Conclusion
and
Recommendations

48

6.1 Findings:
The study, Financial Statement Analysis and Performance Evaluation of Farr Ceramics Limited,
reveals the following majors findings:

Far Ceramics greatly lose its capacity to pay their current obligations by using its current
assets, which indicates they are in risky position in current ratio.

FCLs current liabilities are greater than their Current assets. It indicates, FCL has great
problem to maintain liquidity.

Cash conversion cycle was highly efficient in 2011 They needed -7 days to convert their
assets into cash and worst situation in 2010 when needed 145days.

Farr Ceramics has lower ability to generate sales from its assets during 2010 to 2014.

FCL has lower level of liabilities compared with assets and considered low leveraged and
low risk. Moreover, it performed greatly in 2013 at only 56%.

After 2012 Times Interest Earned ratio is less than 1, means the company is likely to have
problems in paying interest on its borrowings.

Net profit margin of FCL is not in good position except 2011.

. Gross Profit of FCL increased from 2010 to 2011 and reached its peak at 34% and it
remained constant at 32% from 2012 to 2014

Ability of FCL to generate profits from its shareholders investment getting worse on the
time period, which is harmful for the company and at the same time net income produced
by total assets, is getting worse year by year.

When FCL collected their cash in delay, they pay to their creditors in delay, which ensure
balance liquidity and keep company risk free.

FCL is in the second position in NAV and revenues in the market

In 2014 its net profit exit Shinepukur and Fu-Wang ceramics and bit to the Monnu
ceramics Ltd. FCL earned 41072321 which are almost similar to Monnu Ceramics Ltd.

FCL has higher earnings per share which always better than a lower ratio because this
means the company is more profitable and the company has more profits to distribute to
its shareholders comparing to other company

49

6.2 Conclusion:
Farr Ceramics limited is one of the private limited company in the ceramics industry in
Bangladesh, which commenced in 2005. The study concentrated on the financial performance
evaluation. The products line of FARR Ceramics is much diversified in terms of items and
designs. It has been able to develop house brands namely PARR Euro Fine Porcelain Tableware.
FCL has tremendous problem in maintaining liquidity but they try to main it by delay payment to
their creditors. At the same time it is not so good in debt management. However, FCL is highly
efficient to control its inventory, creditors and sales. On the other hand, FCL is in high position
in profitability by improving net profit, gross profit and operating profit. Though they have
problems in ROE and ROA they should recover it by giving deep concentration. However,
Comparing Net income, NAV, of FCL of 2014 with Monnu Ceramics, Shinepukur and Fu-Wang
Ceramics Limited, it is in second position and also it already cover 23% of market by their
selling. Overall it is take good position in market by improving.

50

6.3 Recommendation:
The Financial Statement Analysis and Performance Evaluation of Farr Ceramics Limited require
the following recommendation that may help the FCL to improve financial Performace and to be
a key member in the ceramic sector of Bangladesh:

FCL need to highly concern about their liquidity position. To recover their liquidity
performance they should collect their account receivable as soon as possible on the other
hand, delay payment to their suppliers (creditors) may help to recover liquidity position.

FCL has poor sales and lower ability to generate sales from its assets, therefore, excess
inventory. They need to increase their sales by better advertisement process and discount.

Times Interest earned ratio can be recovered by increase operating profit and operating
profit can be increased by assess administration and selling expenses. It is necessary to
reduce some amount of administration expenses which are getting higher day by day. By
the reduction of administration expense FCL can improve their operating profit also.

For recover the ROE FCL need more common shareholders. They can increase their
Share holder by offering huge returns. Moreover, FCL also needs to raise its Total Asset
by increasing their investment and Account receivable because both items are poor in
amount.

FCL maintain higher Average payment period for better liquidity but it will be cause of
risk in a long run. So need to more concern about delay payment.

51

Bibliography
Project profile 2013, 2014 of Farr Ceramics Limited.
Auditing report 2010, 2011, 2012, 2013 and 2014 of Farr Ceramics Limited.
Bangladesh Ceramic Wares Manufacturers Association (BCWMA)
WWW.Farr.com.bd
https://en.wikipedia.org/wiki/FARR_Ceramics

52